South Korea’s Ministry of Agriculture, Food and Rural Affairs reports that last year’s domestic beef production of 260,000 metric tons (mt) exceeded beef import volume (257,000 mt), pushing Korea’s beef self-sufficiency rate above 50 percent for the first time in many years. Korea’s self-sufficiency rate was 37 percent in 2002, but increased to 44 percent in 2004 when U.S. beef was blocked from the market. The rate was about 48 percent from 2006 through 2008, dipped to 43 percent in 2010, then rebounded to 49 percent in 2012.

Before declining last year, Korea’s domestic cattle herd increased 8 percent per year from 2002 through 2012

Despite recent, voluntary herd-reduction efforts, Korea’s domestic beef production has increased steadily for the past 11 years – climbing 77 percent since 2002, when domestic production totaled only 147,000 mt.

After the first U.S. BSE case, Korea’s producers aggressively increased their herds. Since domestic Hanwoo cattle inventory hit a 2002 low of 1.4 million head, inventory expanded by an average of 8 percent per year and peaked in 2012 at 3.06 million head. Even as Korea’s cattle herd expanded, the number of cattle farms continued to decline. The average number of cattle per farm was only 9.5 head in 2005, but now stands at 23.5.

Voluntary reduction efforts reduced the herd size by 5 percent in 2013, but in the short term this added to the glut of domestically produced beef. The Korean Rural Economic Institute (KREI) projects another 5 percent reduction in the domestic herd in 2014, which is expected to bring a corresponding increase in cattle prices.

Before declining last year, Korea’s domestic cattle herd increased 8 percent per year from 2002 through 2012. The orange line (left axis) is total cattle inventory and the blue bars (right axis) show cows older than two years of age. Both axes are in units of 10,000 head.

KREI projects this year’s domestic beef production to be 238,000 mt, down 7 percent from 2013 due to a decrease in slaughter. Production is expected to bottom in 2018, before picking up again based on the Hanwoo production cycle. KREI also expects imports to increase as lower domestic production brings increases in domestic beef prices.

It will be interesting to see if Korea’s beef production actually rebounds after bottoming in 2018, as forecast. With imports likely to grow following free trade agreements with the U.S. and Australia, Korea will have to continue to subsidize Hanwoo producers, and consumers must be willing to pay higher prices for domestic beef. Carcass utilization is especially challenging in Korea, with changes in consumer demand meaning high prices for middle meats, but low prices for previously popular items like feet and femur bones. Tight global beef supplies and the ongoing drought in Australia could help sustain high prices in Korea, with room for both domestic and imported beef to meet consumer demand.